Title

Money and efficiency wages: The neglected effect of employment on efficiency.

SelectedWorks Author Profiles:

Thomas J. Carter

Document Type

Article

Publication Date

2005

ISSN

1053-5357

Abstract

The real effects of monetary shocks cannot be explained using current efficiency wage models. In these models, wage rigidities can cause money to have real effects, but not plausible real effects. This paper uses published empirical results to show that in a general efficiency wage model, monetary shocks have perverse effects, such as countercyclical employment. Empirically, the negative impact of employment on efficiency is so strong that output falls when monetary shocks cause employment to rise. Employment and output rise together only if real wages rise a greater proportion than either. Alternative models, involving worker perceptions of fairness, are suggested.

Comments

Citation only. Full-text article is available through licensed access provided by the publisher. Members of the USF System may access the full-text of the article through the authenticated link provided.

Publisher

Elsevier

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.